Question

1. Supply & Demand graphs

a) A couple weeks ago, it was Easter. Now Easter is over. What has happened to the price and quantity sold of Easter eggs? Show this on a carefully drawn and labeled graph.  

b) Oil producers started pumping out a lot more gasoline and COVID-19 has a lot of people staying home more than they used to. What do we *know* will happen to market price and quantity sold? Demonstrate this on a carefully drawn and labeled graph.

Answer 1

a) As Easter is now over, there woule be less demand of eggs (people use eggs for gifts) which will shifts aggregate demand curve to its left from AD to AD1 while supply remains the same which will reduce the price from P to P1 and output fall from Y to Y1.

b) As oil producers have started extracting more gasoline which will raise the supply of gasoline which will shift supply curve to its right from AS to AS1 and there is less demand of gasoline as people are at their homes which will reduce its demand which will shift the demand curve to its elft from AD to AD1. It will result in fall in price from P0 to P2 and output to remain same at Y.